FG Bans Dollar-Denominated Contracts for Government Agencies

In a significant policy shift aimed at strengthening Nigeria’s fiscal discipline and stabilizing its national currency, the Federal Government has issued a directive prohibiting all Ministries, Departments, and Agencies (MDAs) from entering into contracts denominated in foreign currency.

The move is part of the implementation measures outlined in the 2025 Appropriation Act, released by the Budget Office of the Federation.

According to the new guideline, all government contracts must henceforth be priced and executed strictly in Nigerian Naira.

Exceptions to this rule will only be considered with the express approval of the Minister of Finance. The Federal Government explained that the decision is designed to reduce the nation’s exposure to exchange rate volatility, promote the use of local currency, and reinforce fiscal prudence across public institutions.

The guideline, which was formally made public on July 16, 2025, outlines a series of control measures to ensure efficient implementation of the 2025 federal budget.

The restriction on foreign currency contracts is expected to help plug financial leakages and reduce inflationary pressures stemming from high demand for foreign exchange in government transactions.

By limiting MDAs to Naira-denominated agreements, the government hopes to improve transparency, ensure more predictable budget execution, and safeguard national economic interests. Analysts have welcomed the policy as a much-needed intervention in curbing reckless fiscal practices that often burden the country’s foreign reserves and increase debt servicing costs.

The Ministry of Finance has advised all government agencies and contractors to review their existing contractual frameworks to ensure compliance. Agencies that must engage in foreign-currency-based agreements will be required to present a compelling justification and obtain ministerial approval before proceeding.

This directive marks another step in the Tinubu administration’s broader agenda to enforce stricter fiscal control, promote local content, and ensure efficient use of public funds in an increasingly volatile global economic environment.